The Zigmont Report (Daily Market Recap for 8/7/18)

Mike Zigmont

Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $12B AUM, offering volatility management solutions to its investor base worldwide.  Mike has been publishing his daily newsletter (Monday-Friday) privately for the firm’s investors and his personal contacts in the investment business since 2008, sending it daily shortly after the market close.

The opinions expressed below are my own and do not necessarily represent those of Harvest Volatility Management, LLC.

Up, up, and away.  Investors bid US equities higher on slightly lighter volumes (95% capital flow).  There weren’t any major news items nor were there any major data releases.  This looks and feels like momentum.  The one news story that dominated the second half of the day was the tweet by Elon Musk that he was considering taking Tesla private.  The stock lurched higher and was eventually halted.  The TSLA bullishness didn’t spread to the broader market but it certainly bolsters the overall bullish optimism.

TSLA was trading around $342 when the tweet came out.  It was halted after it was about 7% higher.  The takeout price in the tweet was $420.  That’s about a 23% premium to the pre-tweet price.  Huzzah!

You can hear the wheels turning in the minds of lots of shareholders right now.  What if GOOG went private?  What if NFLX went private?  What if AMZN went private?

I wonder if this is the beginning of a new phase of equity ebullience.  In the late 90’s the bubble mania eventually landed on eyeballs and clicks… before it all went splat.  If there’s going to be a delusional bubble again, front-running a privatization wave sounds as plausible as anything.

I don’t know if I actually think that’s how the next leg higher is going to play out by the way… I’m just saying that I can imagine it quite clearly.  Back in the 2000’s, I remember institutional investors joking about “beach blanket bingo.”  It was a reference to buying a basket of stocks and waiting for a bunch of them to eventually be acquired… the joke being if you listed your small/mid cap stocks on a square piece of cardboard, you could race your competitors to shout BINGO with the targeted companies.

Anyhow, I’m just saying that trends aren’t limited to price movements.  They can consist of behaviors and attitudes and it’s very easy to picture an environment where investors race to buy stocks in the hope that they will be taken private.

See you tomorrow,

PS. TSLA resumed trading at 3:45 and closed at $379.  Going private was obviously a good idea for that stock.